10-year has been stuck at 5.18% pretty much since the ISM number at 10AM. Given the rally today, the tone is muddled, so I’m less bullish going into tomorrow. BOLD PREDICTION TIME!
Bullish: Number comes in under 150,000, hourly earnings in line or lower (0.3% MoM). Bonds rally 3/8 to 1/2, curve flattens 2-3bp. Swap spreads tighten, MBS widen on volatility concern.
Neutral: 150,000-240,000. Might be a slight relief rally, particularly if hourly earnings are tame and/or the number is more toward the bottom of that range. Curve might steepen at the higher end of that range. Swap spreads tighten, MBS perform well.
Bearish: 240,000+ and/or 200,000+ with hourly earnings high. Bonds sell off mildly, 1/8 to ¼. Curve steepens 1-2bp. Spreads widen, MBS underperform Treasuries.
If it turns out ADP was right as we really get 360,000 jobs added, all bets are off.
You win! And the prize is... you get to be very proud of yourself! In addition, you win the respect of both people who read this blog!
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